Buying a home can be complicated and overwhelming, especially when you are a first-time homebuyer. To help you navigate the home-buying process, we relied on our new book, “The Essential First-Time Home Buyer’s Book”, to compile the 10 must-know, simple secrets that will help you get started and make the process easier along the way:
1. Create a needs versus wants list: Identifying what features are absolutely necessary and those that are nice to have will enable laser focus as you begin your home search. Write down the non-negotiable features your new home needs — the more specific, the better. If a home doesn’t have everything on the list, skip seeing it to avoid compromising. For any listing that does have all your must-haves, keep a record of it. During the open house, take notes and photos of the property so you can review them later when making a decision on which house has what you need and ultimately, is right for you.
2. Determine your buying power: Understanding how much house you can afford can give you a leg up when it comes to buying a new home. Using the realtor.com® Home Affordability Calculator, you can estimate approximately how much of a monthly mortgage payment you can afford. Next up, fine tune your needs list along with your price range with Price Perfect and you’ll have a good sense of the kind of home that is feasible.
3. Optimize expenses and save more: Saving cash for a down payment takes time. A good way to get started is to trim unnecessary spending. Find simple ways to save extra cash like skipping the extra coffee and saving that money in a dedicated account so you can watch your progress. If you struggle to save, automating the process can help. You can have your employer deposit some of your paycheck into a savings account or have your bank automatically deposit money into your savings account.
4. Interview several real estate agents: It’s wise to connect with several agents before deciding who you’ll work with on your home-buying journey. Find out how long the agent has worked in real estate in the area. Ask if the agent works alone or with a team, and what their schedule is like over the coming months as you potentially work together.
5. Work with a local agent: Leverage a local real estate agent who has the experience, negotiating chops, a large network, and local knowledge to help get you through the process to close on the right home for you.
6. Maintain your negotiating position: Remember that what you say in ear-shot of the seller or listing agent can have a significant impact on how they receive your offer. While the home search can be a very long process, keeping your composure is imperative as an over-enthusiastic potential buyer can wind up overpaying. On the flip side, harsh criticism of the home can come across offensively. Avoid statements such as:
- “This is my dream house!”
- “That couch is hideous!”
- “I can afford to spend this much.”
- “I can’t wait to get rid of that.”
- “Why are you selling?”
- “You’ll never get that price.”
7. Make an informed offer: Negotiating can be tricky. Discuss the following aspects of your offer with your agent so that you have a complete understanding of the financial implications before you sign a contract:
- Market price: Your agent can help you determine an offer price based on your budget, market dynamics, and comparable homes in the area.
- Earnest money deposit: Placing a portion of the purchase price in an escrow account can demonstrate to the seller that you are serious. Just make sure to discuss the scenarios that could cause you to lose this deposit.
- Contingencies: These are provisions that can allow you to get out of your contract without losing your deposit under certain circumstances, such as passing a home inspection or appraisal, or securing a loan. With your agent, review how these provisions can protect a buyer’s interests and what impact they can have on a sale.
8. Asses the home with an appraisal: If you’ve applied for a mortgage, your home-to-be still has to undergo a home appraisal. An appraiser will estimate the home’s value based on home condition, location, square footage, and renovations. If the appraisal comes in lower than what you have offered, you have options. Some of these may include:
- Appealing the appraisal: Keep in mind that an appeal can extend the process by a few weeks.
- Get a second appraisal: This is an added cost and can also extend the process.
- Negotiate with the seller: Sometimes a seller will lower the price or help in other ways.
- Walk away: You’ll likely lose the money already paid for inspections and/or appraisals, and your earnest money deposit may be at risk if you don’t have an appraisal or a financing contingency in your contract.
9. Follow your home inspector’s checklist: Your inspector should be trained to check your soon-to-be home for any issues. Join your inspector during the inspection to ask questions and find out any hidden details of the home. If any issues arise, the inspector can recommend necessary steps to fix them. The home inspection should vet several features and infrastructural components such as:
- Roofing and structural problems
- Mechanical and electrical troubles
- Plumbing concerns
- Overall home condition, functionality (i.e. windows, doors, vents, lights, fans), and safety (i.e. mold, hazards, faulty smoke detectors)
10. Wait until the sale is final: Don’t break the deal! The sale is not final until you sign all of the paperwork and get the keys. Anything you do before closing has the potential to impact the sale. Most states do not have in-person closing meetings anymore, however, if you do wind up in an in-person closing meeting, it’s advantageous to avoid voicing these possible deal-breakers:
- “I can’t wait to get all the new furniture we bought.”
- “I can’t wait to gut the house.”
- “Could you remove that swing set from the backyard?”
Buying a home for the first time is a long, yet rewarding process. Preparing for that journey is one that not only requires a financial commitment, but also time invested in identifying what kind of home could be the best fit for you and selecting the right real estate professional to guide you along the way. With these tips in mind, you’ll be better prepared for what to expect.